Centre asks states to slash VAT on jet fuel to four percent

New Delhi: With Indian airlines posting a combined loss of about Rs 10,000 crore in 2012-13 and a total debt of almost Rs 90,000 crore, government on Tuesday asked state governments to slash value added tax (VAT) on jet fuel to four percent and ease a major burden on the industry.

Observing that the prime reason for these losses was high fuel cost which constituted almost 40-50 percent of an airline's total costs, Civil Aviation Minister Ajit Singh said the aviation turbine fuel (ATF) prices were high due to rising base price and "very high VAT imposed by state governments."

Currently, VAT on jet fuel ranges from 4 to 30 percent. In 2012-13, the airlines posted a combined loss of Rs 9,779 crore and had a total debt of Rs 87,779 crore, official figures presented at the conference of state Civil Aviation Ministers showed.

Addressing the conference, Singh said while certain states like Chhattisgarh, Jharkhand, Madhya Pradesh and West Bengal have recently reduced VAT, "I thank them and hope others would also oblige."

He gave examples of these states and said lowering of fuel costs would lead more people to take to air travel and considerable spinoffs to the economy, as a consequence. Lowering of VAT by Chhattisgarh has led to "a six-fold increase in ATF uplift" and brought in more flights to Raipur.

"So my request to you all will be that you should take up with your government to reduce VAT on ATF to four percent," he said.

On airport development in Tier-II and III cities, he said that the government has decided to operate, manage and develop 20 airports across the country, including Chennai and Kolkata, through public-private partnership. While Requests for Qualification (RFQs) for Chennai and Lucknow have already been issued, RFQs for Kolkata, Jaipur, Ahmedabad and Guwahati "are in the process and will be out this week," the Minister said.